Watch out! The oil runup is getting hotter

Crude continues its runup, reaching for $110 in Friday's session as the impending expiration of the August contract, a short squeeze and the desire to cover shorts into the weekend are adding fuel to the fire.

The path of least resistance remains higher, as Wednesday's option expiration allowed volatility—and bullish volatility, at that—to slip back into the market. The high on Thursday was $108.43, and the market experienced a quiet overnight session.

As we head into the weekend, I would not expect to see a switch in direction, and it is more likely that we will see a run at the $110 level. With economic conditions stable, demand worries on the back burner, and crude stockpiles at the lowest level since January, traders have had no reason to sell oil this week.

Bulls can look for a pullback to previous highs at $107.45 as a buying opportunity. This level would be attractive because it would just squeeze Friday morning's low at $107.73.

The Dollar Index is failing at 83, and this is the last piece of the puzzle to drive this market through $110. The Dollar Index has been below the major 50 percent retracement, but look for a close below the swing of 82.475 as a signal of failure. This will give crude, as well as other commodities priced in dollars, a major boost.

—Rich Ilczyszyn is founder and CEO of iiTrader. Follow him on Twitter @iiTrader.